ALPS Cut to ‘BBB’

Standard & Poor’s Ratings Services lowered its counterparty credit and financial strength ratings on Attorneys Liability Protection Society Inc. (ALPS), a Risk Retention Group, to “BBB” from “A-” and removed the company from CreditWatch, where it was placed in mid-March. The outlook is negative.

The action reflects the company’s decision to strengthen its reserves by $7.3 million at the end of 2002, according to S&P’s credit analyst Donovan Fraser. The reserve strengthening was targeted to the accident years 1998 through 2001. Even further reserve strengthening should follow ALPS’ analysis of the 2002 accident year, Faser said.

The reserve increases follow an extensive claims, rate, and reserve review process undertaken by the company in the past 15 months. The statutory combined ratios of 108.2 percent and 104.3 percent for calendar years 2002 and 2001, respectively, marked the first consecutive years of underwriting losses for the company since its inception in 1987. After reflection of the aforementioned reserve increases, the company would have operated at an underwriting loss in four of the past five years on an accident year basis.

The “BBB” rating reflects the company’s demonstrated ability to increase rates in the current environment, strong but diminished capitalization as measured by a S&P’s capital adequacy ratio of 166 percent, and a good niche servicing small to midsize law practices.

The negative outlook reflects the challenges faced by the company.